Sime Darby's FY 18 net profit to rise by 4.6% from Bangi land sale

Malaysian Sime Darby, Japan's Mitsubishi Corporation, Tokyu Land and Hong Kong Land have also signed deals in Jakarta and surrounding areas.

PETALING JAYA: Sime Darby Bhd could reap gains of RM111mil from the sale of a land in Bangi by Seriemas Development to SP Setia Bhd for financial year 2018 (FY 18), CIMB Research said.

The research house said on Tuesday the transaction could further bump up its FY 18 net profit by 4.6%, noting that it was maintaining its add call on the stock with a sum-of-parts (SOP)-based target price of RM9.80.

Sime Darby Property’s 40%-owned Seriemas had recently entered into a conditional sale and purchase agreement (SPA) to sell 342.5 acres of land in Bangi to SP Setia for RM447.6mil (or RM30 per square feet (psf)), with profit-sharing of 20% of the pre-tax profit from the development, subject to a maximum of RM44.7mil  (or RM3 psf).

Seriemas is 40%-owned by Sime Darby Property and 60%-owned by PNB Development, which is a wholly-owned subsidiary of Permodalan Nasional Bhd (PNB). 

PNB also holds a 55% stake in SP Setia.

The land is planned for a mixed development township comprising residential and commercial segments. The proposed development is expected to have a gross development value (GDV) of
RM2.74bil. 

SP Setia targets to launch the township development of the land in 2019.

Development is expected to take at least eight years to complete. The research house said it rough estimation net profit gain from the sale of land for Seriemas is RM270mil. 

It arrived at the potential gain after deducting RM26mil for the original cost of investment of the land, estimated RM74mil cost of converting the land to property development, and 20% effective tax rate on the pre-tax profit gain from the sales consideration of the land of RM447.6mil. 

The sale of the land will be settled in cash. The first 10% payment will be paid to Seriemas upon execution of the SPA while the second payment of 90% will be paid on or before the expiry of three months from the fulfillment of the last of the conditions precedent. 

The proposed acquisition is expected to be completed by Q4 17.

The research house said selling price was  fair as it is based on market value as the parties arrived at the selling price on a ‘willing-buyer willing-seller’ basis after taking into account the indicative market value of the land of RM477.7mil by an independent valuer.